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Bill
Bill, Enrolled Agent
Category: Tax
Satisfied Customers: 3151
Experience:  EA, CEBS - 35 years experience providing financial advice
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My former employer offered a retirement buyout. I had mine

Customer Question

My former employer offered a retirement buyout. I had mine transferred to an IRA but the 1099 they sent says it is taxable. What can I do?
Submitted: 8 months ago.
Category: Tax
Expert:  Bill replied 8 months ago.
Was there a G in box 7 or the 1099-R?
Customer: replied 8 months ago.
Yes there is G
Expert:  Bill replied 8 months ago.
Is there a 0 in box 2a or is it blank?
Customer: replied 8 months ago.
No. The full amount is in Box 2a. That is the error.
Expert:  Bill replied 8 months ago.
The firm that issued the form should issue a corrected one without an amount in box 2a. However, the "G" in box 7 is reporting that a direct rollover was made and the IRA that received the rollover will report a rollover being received on Form 5498. These 2 forms will match up with the IRS records and should not cause you any problems. The 5498 will not be issued until the end of May this year. On line 16a of Form 1040 you will report the gross amount and enter $0 on line 16b and write "Rollover" next to the line.
Customer: replied 8 months ago.
What do I do? I can't file with that amount in the taxable box.
Customer: replied 8 months ago.
the firm won't fix it because on one of the forms they sent me, the questions were not clear and I checked the Roth IRA. However, the money was sent to the investment company on my behalf and went into a regular IRA. Should I file ?
Customer: replied 8 months ago.
OK. I saw your answer about line 16a and b. I am just worried that the discrepancy with the 1099 will trigger an audit.
Expert:  Bill replied 8 months ago.
It still won't be a problem since the funds were rolled into a traditional IRA. The 1099-R and 5498 will match up with same amounts. I also assume there was no tax withholding in box 4 of the 1099-R. Hypothetically if the distribution had instead been made directly to you and you rolled over to an IRA within 60 days, it would not be taxable. These types of rollovers occur everyday. Assuming there are no other codes in box 7 besides the G, the IRS expects to see the rollover on the 5498.
Expert:  Bill replied 8 months ago.
If it had been rolled over to a Roth IRA rather than a traditional IRA, then it would have been taxable.
Expert:  Bill replied 8 months ago.
Pages 28 - 32 of this IRS publication explain rollovers and reporting -https://www.irs.gov/pub/irs-pdf/p575.pdf